Banks, miners, energy groups and building materials specialists are among companies in shareholders’ sights as discontent mounts over exorbitant pay deals for boardroom bosses.
After an explosive start to the annual general meeting season on Thursday - when shareholders voted against pay deals at BP and Smith & Nephew – big City investors are now scrutinising pay deals at FTSE companies such as mining company Anglo American, building products group CRH and advertising firm WPP.
Centrica, the owner of British Gas, will hold its AGM on Monday and boardrooms are on high alert for further signs that investors are preparing to revive the 2012 “shareholder spring”, when a wide range of companies faced rebellions over pay.
“The AGM season has started with a bang. It is unprecedented for two FTSE 100 companies to have their pay voted down on one day,” said Sarah Wilson, the chief executive of shareholder advisory body Manifest.
Shareholders said they were less willing to accept big pay deals and companies that judge bosses’ performance without considering the wider context.
That context refers directly to BP, which had awarded its chief executive Bob Dudley £14m, including 100% of his possible bonuses, even though the oil group had run up record multibillion-pound losses.
Oil companies and miners, which are cutting thousands of jobs, are especially under scrutiny but other pay packages could also cause unrest, with the gap between rich and poor highlighted by the Panama Papers and benefit cuts.
Paul Lee, the head of corporate governance at Aberdeen Asset Management, said: “The mood has hardened and people are taking a more robust approach to pay than they have done.
“Companies in some cases have eased the restraints that we’ve seen in the difficult years since the financial crisis and that’s leading to some actions that shareholders aren’t happy about. We don’t say there’s a number that’s too much but if it’s a very large number it needs to be justified.”
Shareholder advisory group ISS has recommended a vote against boardroom pay at next week’s AGM of mining company Anglo American. The firm’s chief executive, Mark Cutifani, received £3.4m and could earn £6.3m this year for achieving his targets, according to the small investor group ShareSoc.
Anglo American – where the share price slumped from 1152p to 328p last year – said Cutifani’s bonus was reduced by 40% and his salary had been frozen.
CRH has increased pay for all its directors including the chief executive, Albert Manifold, who was paid €5.5m (£4.4m) last year. His salary has risen to €1.4m from €1.29m and he can now earn almost six times that in bonuses and shares, compared with less than four times on last year’s salary, taking his maximum earnings to about €10m.
Dublin-based CRH said the increases were justified by acquisitions that had made it a bigger company and insisted it had consulted shareholders.
But a fund management source said investors were unhappy about the increases because they reward CRH bosses merely for doing deals and said the company’s consultation with shareholders was lacking.
HSBC is the first major bank to hold its AGM this year, on Friday 22 April, when executive pay, succession planning – the chairman, Douglas Flint, has said he will step down next year – and its links to Mossack Fonseca, the law firm at the centre of the Panama Papers, are expected to be raised by investors.
Other banks – accustomed to rows over pay – hold their AGMs in the coming weeks, including Barclays, where a move by new boss Jes Staley to cut the dividend for the next two years is expected to unleash rows over boardroom pay.
Pay deals at consumer goods company Reckitt Benckiser, where the pay of the chief executive, Rakesh Kapoor, almost doubled to £23m last year, and advertising firm WPP, whose chief executive Sir Martin Sorrell is in line for at least £63m for last year, are other potential flash points.
Shire, the drugs company, Standard Chartered, the Asian-focused bank, and Man Group, the hedge fund, also face potential unrest over pay.
Luke Hildyard, the governance and stewardship lead at the Pensions and Lifetime Savings Association, said: “Lavish incentive payments should not be made to executives while their companies face an uncertain outlook and their employees are losing jobs.
“It’s unnecessarily divisive and likely to weaken industrial relations and human capital. It’s perfectly possible to exercise a bit of discretion and hold back on pay awards that are plainly inappropriate, even if certain operational targets included in the policy have been met.”
Tim Bush, the head of governance at Pensions & Investment Research Consultants (Pirc), a shareholder advisory group, said: “Any remuneration committee chairman with a similar scheme to the one at BP is at risk of similar rejection. There are a lot of concerned people out there.”
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